Danone said to target Mead Johnson with sale of $2 bn stake in Yakult

Groupe Danone, the world's largest yogurt maker, is said to be weighing plans to sell its stake worth $2 billion in Japanese dairy-drink producer Yakult Honsha Co, to raise funds for a possible acquisition of US baby-food formula maker Mead Johnson Nutrition Co, valued at $20.5 billion.

Citing people familiar with the matter, Bloomberg today reported that Danone is planning to sell its 20-per cent stake in Tokyo-based Yakult, which has a market value of around $10 billion, valuing its stake at around $2 billion.

Paris-based Danone has held internal discussions about a possible sale, but the deliberations are at an early stage and no final decision has been made, the report said.

The French yoghurt company, which is in advanced talks to sell its medical nutrition unit for about €3 - 4.5 billion ($5.6 billion),  had also held board discussions on the possibility of investing in potential targets, including Mead Johnson, the report added.

Danone, the maker of the Evian water and Activia yogurt brands, had last year scrapped plans of buying Yakult after the Japanese company opposed the deal since the two have a joint venture agreement, the terms of which bars Danone from raising its stake.

Although the nine-year agreement signed in 2004 was replaced with a new one last year that allows Danone to hike its stake in the Japanese milk drinks producer, the French company said that it was no longer interested in either hiking its stake or a acquiring Yakult .

Danone and Yakult have existing joint ventures focusing mainly on developing probiotic drinks in markets such as India and Vietnam.

Danone, a Fortune 500 company with 2013 revenues of over €21 billion, is one of the world's most successful health food companies and the world's largest yogurt maker. It has recently been making divestments in Europe and huge acquisitions in emerging markets, including Russia, China and India.

Emerging markets now account for 49 per cent of the company's total sales, with North America contributing 10 per cent, and France and Russia accounting for 11 per cent each.

Founded in 1955, Yakult operates in the food and beverages, pharmaceuticals and cosmetics sectors. It began its overseas expansion in 1964 and now sells its products in 30 countries, including China, South Korea and Mexico.

Mead Johnson, once majority owned by Bristol-Myers Squibb and spun off in 2009 as an independent company, is a major manufacturer of infant food formula and competes with Danone, Nestle S.A. and Abbott Nutrition among others.

The Illinois-based company makes nutritional products for infants and children and sells its 70-plus products to more than 50 countries.

Mead Johnson's Enfamil line of infant food formulas is its popular consumer brand along with fortified beverages for children Sustagen and Lactum and Nutramigen, a nutritional supplement for children with dairy allergies.

The company also markets nutritional supplements for use by pregnant and breastfeeding moms and specialty nutritional products for premature infants and infants with metabolic and digestive disorders.

Mead Johnson has a market cap of $20.5 billion and posted net profit of $650 million last year on revenues of $4.2 billion.